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HSBC: "outlook for GBP is not promising"

HSBC: "outlook for GBP is not promising"

Information is not investment advice

What happened?

HSBC wrote in its regular monthly forecast that "the outlook for GBP is not promising, in our view, given the broader underlying flow dynamics". The common consensus was that the pound would rally after the signing of an EU-UK trade deal. However, HSBC thinks oppositely.

The Bank of America agrees with HSBC and points to the cheapness of UK assets in comparison to EU and US. Besides, the pound exchange rates are significantly lower than they were before the EU referendum results in June 2016.

Forecast

HSBC forecasts GBP/USD will be trading at 1.3400 through this year, while EUR/GBP will rise to 0.94.

Technical analysis

EUR/GBP is touching the dips now, therefore we could expect the pair to rise soon. On the weekly chart, the downside is limited by the 100- and 200-period moving averages at 0.8840. Let’s get a closer look and analyze the 4-hour chart. We see that the pair is heading towards 0.8400 at the lower line of the Bollinger Bands indicator, which the pair is unlikely to cross. Therefore, we can expect the pullback to the upside from this level. On the way up, the pair will meet resistance levels at Monday’s high of 0.8885 and the high of January 22 at 0.8920.

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